Hang Seng Bank upgrades 2026 HK GDP growth forecast to 3.1pc

Hang Seng Bank raised its forecast for Hong Kong's economic growth in 2026 to 3.1 percent on Monday, up from 2.5 percent, as both domestic and external conditions are supportive of a stronger growth trajectory.

The bank said that Hong Kong's retail sector has shown significant improvement over the past year, reflecting the positive wealth effect from stronger asset market performance, particularly in both the equity and property markets.

It anticipated that continued gains in asset markets will further bolster consumer sentiment, supporting sustained growth in consumption demand, while a weaker US dollar combined with a stronger yuan should enhance the competitiveness of the city's retail sector and stimulate tourism demand.

Besides, the lender estimated that the government's fiscal balance is expected to remain positive over the next five years after including net proceeds from government bond issuance.

While its operating account is projected to stay in surplus, the capital account will remain in significant deficit due to planned expenditures, especially for the Northern Metropolis development, it added.

Hang Seng Bank noted that the volatility of land premiums, a major source of government revenue, continues to pose a structural challenge, indicating that the government's need to issue bonds is closely tied to the performance of the property market.